Ohio Gov. John Kasich made official his administration’s refusal to create a health insurance exchange in Ohio as mandated by President Obama’s health care law, instead deferring to the federal government.

With a November 16 letter to the Centers for Medicare and Medicaid Services, Kasich cited the higher costs and uncertainty caused by President Obama’s law as reason for his decision.

“Ohio will not operate a federally-mandated exchange but instead will exercise its right under the law to leave that to the federal government… At this point, based on the information we have, states do not have any flexibility to build and manage exchanges in ways that respond to unique needs of their citizens or markets,” Kasich wrote. “Regardless of who runs the exchange, the end product is the same.”

Feds to Create Exchange

The decision on the exchange may have been easy for Kasich to make, considering that Ohio is one of 14 states where a state-run exchange would be illegal because of the coverage mandates of Obama’s law. Section 21 of the state constitution, added in 2011, states, “No federal, state, or local law or rule shall compel, directly or indirectly, any person, employer, or health care provider to participate in a health care system.… ‘Compel’ includes the levying of penalties or fines.”

According to Kasich’s deputy, Ohio Lieutenant Governor and ODI Director Mary Taylor, setting up an exchange would have cost the state significantly. Immediately following the U.S. Supreme Court decision upholding most of the law, Taylor cited estimates at a press conference which indicated Ohio taxpayers would face an additional $43 million in annual costs in order to run a state exchange.

Decision Welcomed

Kasich’s decision was welcomed by Maurice Thompson, executive director of the 1851 Center for Constitutional Law.

In a November 16 release, Thompson said, “We are pleased that the Kasich Administration heeded the clear effect of the Health Care Freedom Amendment (passed in 2011), which prohibited Ohio from enacting a state based Obamacare exchange.”

“We can now turn our attention away from the Kasich Administration, and begin to prepare litigation that ensures that Ohio employers will not be subjected to the $3,000 per employee fine, and that Obamacare ultimately collapses under the weight of its own legal infirmities,” Thompson added.

Pressure on Medicaid Expansion

When it comes to the other major decision facing governors, Greg Lawson, a policy analyst with the Buckeye Institute, says he thinks Kasich will face increased pressure to expand Medicaid.

“The Ohio Hospital Association is in favor of Medicaid expansion for a number of reasons. But the bottom line is that what is in the interest of the OHA is not necessarily what is in the best interest of the state of Ohio,” Lawson said. “They’re a powerful group. In rural communities, the hospital may be the largest employer in the community, and they will put pressure to expand the program. He may try to thread the needle on the issue.”

Asked about expanding Medicaid eligibility, Eric Poklar of the Governor’s Office of Health Transformation said the office had yet to choose a path.

“We haven’t made a decision on expansion yet,” Poklar said.

Costs Could Burden Taxpayers

Before the election, Kasich refused to take a firm position against expanding Medicaid in an August 2 interview on the conservative podcast Coffee & Markets.

“I’ve instructed my staff to begin to talk to Democrat and Republican staff members for [other] governors to see if there’s a way that we can carve something out here,” Kasich said, though he cited estimates from Ohio Medicaid director John McCarthy which showed the state lacked the funds to pay for higher Medicaid enrollment even without increasing eligibility.

Lawson says the costs could burden Ohio taxpayers significantly.

“Any expansion of Medicaid could be deeply problematic,” said Lawson. “The state of Ohio could be left holding the bag. We know what the matching rate is now, but not what it will be in the future. If we are locked in to an expensive program and the federal government doesn’t hold up its end, it could force out a lot of other necessary spending, like on education and roads.”